William Wrigley Jr. Company (NYSE: WWY) is usually known simply as "Wrigley's." The company is practically the gum king of the world, but does a stick of Wrigley's stock pack long-lasting flavor or is it just a shiny wrapper?

1. With a total debt over EBITDA (earnings before interest, taxes, depreciation and amortization) of only 0.8, the company could be considered under-leveraged, which sometimes signals that a company could become a takeover target.
2. As a pure-play confectionery company, Wrigley is not subject to the winds of the cyclical economy. Wrigley is a safe and defensive stock that could perform well in good markets and bad.
3. It's unlikely many competitors could compete with the low prices of Wrigley's products.
4. Wrigley provides steady dividend income to investors with about a 2 percent yield.
5. In 2007, 67 percent of the company's net sales came from international sales--a significant plus in the recent declining dollar environment. This trend should accelerate as the overseas product markets show larger growth in consumption than the North American market.

1. With a P/E (price-to-earnings ratio) of 27.8 and an enterprise value/EBITDA of 13.5, Wrigley is trading at a significant premium to both the market (measured by the S&P 500) and competitor companies.
2. Cadbury Schweppes plc has been a significant competitor in the U.S. as well as Britain, where it gained 12 percent market share in just 2 months after the UK-launch of the Trident gum brand in 2007.
3. Wrigley had significant currency gains in 2007--over $200 million worth. Over time, currency gains are not sustainable as a source of income and mask weakness in earnings in the short-term.
4. Producing one-third of the gum worldwide, growth could become more difficult than in the past due to Wrigley's size relative to the overall product market.
5. Though Wrigley is paying a roughly 2 percent yield, it isn't enough to overcome inflation, especially with the increase in raw material and oil costs.

It's everywhere--plastered on the sidewalk and on the bottom of your shoe. It's in advertisements and almost always in the checkout line at the store. The guy on the bus is chewing it. With all that exposure and longevity, you may think that a company like Wrigley's, the leading gum producer in the world, would be a smart investment. Let's find out.

1. Wrigley's is the world's largest gum company and is an inveterate global brand.
2. The company produces more than just gum, with products such as Altoids, Creme Savers, and Life Savers. That's diversification, and it's good for companies, not just taste buds.
3. Cadbury is Wrigley's biggest competitor, but it has only 6 chewing gum brands, compared to Wrigley's 12.
4. The company has incredible management, which has been able to consistently grow the company both in sales and earnings over the past decade.
5. Chewing gum is anti-recessionary. While people have been accustomed to cheap prices, Wrigley has leverage because if they increase prices just a tad every few years, people will still pay for it. I know I will.

1. For a food company that is trading at almost 28 times earnings, it is priced for perfection.
2. Gross profit growth from North America has held steady at four percent for the last two years, compared to double digit growth from other geographic regions.
3. Since August 2007, two out of four analysts downgraded Wrigley. Research experts are wary, which makes me nervous as well.
4. An estimated growth of 10 percent next year does not justify price. Share-holders are paying 27.8 times earnings for a measly 10 percent. Not me!
5. The company is having higher input costs that go into producing product, such as sugar, sweeteners, and corn syrup. Prices for these items have increased in recent years, squeezing margins.

Editor's Note:

brass is a quarterly publication, and as such, there could be significant information, news, or price changes that may differ from resources available at the time this article was written. All analysis is meant for educational purposes. You should not make decisions based on information contained in brass without the advice of a qualified professional advisor.

Sources:

reveredata.com; moneycentral.msn.com; finance.google.com; finance.yahoo.com; wrigley.com; m-w.com; telegraph.co.uk; infinancials.com; cadburyschweppes.com; investopedia.com; truthabouttrade.org; biz.yahoo.com; bls.gov